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Institute of Personnel Management (CIPD) reports that the treasury are considering a German model of tax-free ‘mini-jobs’ plan

“The idea, championed by the influential Free Enterprise Group of Conservative MPs, is based on a scheme that operates in Germany. There, workers can earn up to 400 Euros (£315) a month without paying tax, while employers pay only a small flat fee for each such ‘mini-job’. The model is said to have been effective in encouraging job creation, as employers are more willing to take on labour at low cost as and when required.

Sources close to the chancellor have told newspapers that the idea is under serious consideration by the Treasury as part of its efforts to promote growth and cut red tape. London Mayor Boris Johnson has also spoken out in favour, telling the Financial Times: “Flexible employment, lower taxes and less burdensome regulation are essential drivers for jobs and growth. The German mini-job system is at least worthy of further investigation.”

However, critics say that the mini-job system has encouraged employers in Germany to split full-time jobs into several small parts to take advantage of the tax break. Furthermore, Germany has no minimum wage and system has been blamed for driving keeping wages artificially low.

Business Secretary Vince Cable is said to be sceptical of the idea, believing that similar goals are achieved by the Lib Dem-inspired government policy of raising the personal allowance threshold for income tax.

The Department for Business, Innovation and Skills said in a statement: “This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour. This is quite different to the situation in the UK.”

The CIPD article goes on to say “The government is already taking action to take more people out of income tax and we are carrying out a root-and-branch reform of labour laws to make business more effective while maintaining protections for employees.”

To me, this sounds like an exciting way for employers to kick start high risk projects and for employees looking at alternative ways to work.
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